Improvement Amid Crisis: The Road to Iraq’s Economic Recovery

By Brooke Siegler

Iraq has faced extremely difficult circumstances since the 2003 overthrow of Saddam Hussein and the subsequent establishment of the Republic of Iraq. The country has undergone numerous bouts of political instability and turbulence in its economy over the past two decades. In October 2019, the fragility of the Iraqi state became apparent as young Iraqis took to the streets to express their discontent with the rampant government corruption, high unemployment rates, and the defunct socio-economic system that has plagued the citizens of Iraq for years. Iraq then began 2020 on the global stage after the US killing of Iranian General Qassem Soleimani on Iraqi soil resulted in rising tensions and the possible outbreak of war between Iran and the US. Since 2003, Iraq’s economy has been extremely tempestuous, but recent signs point towards modest and steady economic recovery in Iraq. The outbreak of COVID-19 has, inevitably, slowed this progress, and will make maintaining this economic progress a challenge, but a recent trend of positive signs indicates a potentially more promising future for Iraq.

Poverty, corruption, and unemployment remain rampant throughout Iraq and are inhibitors to the economic and political success of the state. There has been steady progress, however, following the 2003 overthrow of Saddam Hussein and the 2017 defeat of ISIS in Iraq. GDP in current USD has increased from $36 billion in 2004, to $234 billion in 2019. More specifically, since the defeat of ISIS in 2017, GDP has risen from $195 billion to $234 billion. In 2019, annual GDP growth reached 4.4%, which is a monumental increase from the -.6% growth in 2018. Moreover, per-capita GDP in current USD has increased from $4,752 in 2004 to $7,129 today. Oil production has doubled since the ousting of Hussein, while export revenues from oil have tripled. COVID-19 is expected to deplete these numbers as oil prices collapsed, leading to a projected 5% contraction of Iraq’s economy in 2020, but recent efforts taken to diversify Iraq’s economy may help recover some of its lost revenue.

Other indicators point to an improvement in the quality of life since the defeat of ISIS. Mobile telephone users and internet users are everywhere, with the total number of mobile telephone users roughly equalling the population. The annual displacement rate of Iraqis has been more than halved since 2015, while the population has continued to steadily rise. Civilian fatality estimates have reduced 10-fold since Hussein’s rule, although the fatalities from political violence still lie in the low thousands. Literacy rates have increased from 74% in 2000 to 85% today and the life expectancy has increased from 63 in 2002 to 73 today.

Although Iraq has showed progress and can be characterised as heading down a more promising path, the country still has a long way to go in achieving economic and political stability. Protests have become more frequent in recent years, and Iraq still ranks high in global indices on corruption and press freedom. In order to ensure the country continues to progress down a more positive path, Iraq should be focused on diversifying its economy to limit its reliance on oil, improving public sector institutions, increasing investment in human capital and skills and correcting infrastructure gaps in transport, energy, and technology. In order to accomplish this, the government of Iraq must look more broadly to three underlying constraints that are currently inhibiting reform and success: lack of security, a weak social contract coupled with a lack of faith in state legitimacy, and lack of macroeconomic diversity. Fixing the specific problems that plague Iraqi society involves addressing these three underlying conditions that preclude state stability and state success. 

Addressing these underlying challenges will be a vast undertaking for Iraqi leaders and will take time and significant social pressure to catalyse effective change. But the gradual positive progress Iraq has made in the past two decades, and specifically since 2017, is worthy of being noted and examined. 

The views expressed in this article are the author’s own and may not reflect the opinions of the St Andrews Economist.

Image Source: The Globe Post

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